Contributed by: Matt Trujillo, CFP®
What happens if you don’t start saving for retirement in your 20s or 30s? Recently I’ve had a few initial meetings with potential clients who have, for various reasons, had to delay their retirement planning until later in life (i.e. late 40s to mid-50s). In many cases I heard things like, “Will I ever retire?” and, “Should I even bother trying?” I tell them: Where there’s a will there’s a way.
Here are 4 things you should be doing if you are trying to play catch-up with retirement planning.
- Save a lot of money: This almost goes without saying. If you have nothing or very little saved for retirement, then you are likely going to need to save at least 20-25% of your income to catch up, depending on your time horizon before retirement.
- Consider taking more risk than your peers: Typically people in their mid-50s who have been saving for retirement for many years, don’t need to take significant risks in their portfolio to meet their retirement income goals. Often times a balanced 60% stock and 40% bond portfolio can generate sufficient risk adjusted returns. However, if your nest egg is small, then you may not have the luxury of having this type of portfolio. If you’re playing catch-up, you may consider allocating more of your capital to diversified stocks.
- Get a handle on cash flow: Nobody likes budgeting, but if you are going to save the percentage of income necessary to catch up, then you will need to have a good base level of understanding of where your money is going on a monthly basis.
- Put a plan in place: Get a written financial plan so you know what you need to be doing to get on the right track! Also, consider working with someone who will keep you accountable in terms of saving money.
These recent conversations with clients have ended with a reassuring message from me: Don’t lose heart! Everyone has to start somewhere!
Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Trujillo, CFP® and not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.